Fears of an economic downturn are growing among CEOs, and some are convinced that the economy has already reversed.
Most CEOs and other C-suite leaders around the world believe their geographic region will go into recession by the end of 2023, according to a Conference Board poll released Friday.
The business research firm found that 60% of CEOs expect the economy to shrink in its main area of operations in the next 12 to 18 months. 15% of CEOs say they believe their region is already in recession.
This increasingly pessimistic sentiment among business leaders about the economic outlook comes as central banks around the world come up with aggressive plans to raise interest rates in order to curb inflation highs. several decades. In the US, the Federal Reserve on Wednesday raised interest rates by 0.75%, the largest increase since 1994.
More than 60 percent of CEOs worldwide say they expect a recession in their main region of operations before the end of 2023 or earlier, a sentiment shared by other C-suite executives.
The higher-than-expected rate hike by the central bank sparked a surge in revised downward forecasts on Wall Street. Bank of America Global Research economists have lowered their growth forecast for the United States this week, and the firm now sees a 40% chance of a recession next year.
Meanwhile, JPMorgan strategists said the fall of the S&P 500 represents an 85% chance of recession. Earlier this week, the S&P 500 (^ GSPC) entered a bearish market.
But many U.S. CEOs had already indicated that they were preparing for an economic downturn even before the Fed’s last move.
In recent weeks, top business leaders, including JPMorgan CEO JPM Jamie Dimon and Tesla CEO TSL Elon Musk, have expressed concern about the economic outlook, and have even taken it measures to prepare for what they have warned are hard times.
Elon Musk pauses and looks down as he speaks at a press conference on February 10, 2022. (Photo by JIM WATSON / AFP via Getty Images)
In early June, Musk said he had a “super bad feeling” about the economy, and revealed a plan to cut about 10 percent of jobs in the electric vehicle maker and “stop all hiring at all.” the world”.
Musk’s warning came the same week Dimon spurred a wave of recession talks, telling business attendees that an economic “hurricane” was underway.
The story goes on
“You’d better get ready,” Dimon told an audience of analysts and investors. “JPMorgan is preparing us and we will be very conservative with our balance sheet.”
Like Tesla, other companies have also pointed out that their prospects are bleak by reviewing hiring plans or firing workers.
Citing preparations for an “economic downturn”, cryptocurrency exchange Coinbase (COIN) fired 18% of its staff this week. And in the real estate sector, an increasingly worrying housing market has led to job cuts in both Redfin (RDFN) and Compass (COMP).
Still, while many leaders sound the alarm, some maintain a more temperate view of the economy.
Morgan Stanley (MS) CEO James Gorman, in a recent conference, suggested that he thinks a recession is on the table, but it is not inevitable, pointing to the bright spots of the current environment: solid business balances, solid consumer spending and a tight labor market.
“We’re likely to go into recession, obviously,” Gorman said in an investor panel on Monday. “There are now 50-50 odds.”
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Alexandra Semenova is a Yahoo Finance journalist. Follow her on Twitter @alexandraandnyc
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